Disruptive or innovative?

Today’s leading beauty brands are increasingly under threat  from smaller disruptive players. New opportunities, arising from changes in consumer behaviour, are now often being met by new, fast-growing insurgent brands or local businesses with a closer connection to their customers. Are these up-comers really disruptive? This article explores disruption in the context of emerging beauty and personal care brands, with a focus on Europe, the Middle East and Africa. It delves into beauty innovators in local markets that have identified and catered to a gap in their market and evaluates how disruptive these brands are within their local market. With the word ‘disruption’ being so influential today across so many industries, Euromonitor has built a framework around the concept, in order to help identify and explain what disruption is. Renovation has a main purpose of re-establishing a brand within the category it has traditionally served. Innovation is more transformational, leading to the creation of new subcategories. Lastly, disruption is where a company invents an entirely new category or market. It is about reconceptualising the market, creating consistent engagement and being consumer-centric, often delivering a product or service that meets needs consumers weren’t even aware they had. It’s about leading fearlessly, acting boldly and quickly, and not being tied down by layers of bureaucracy. While renovation and innovation help companies and industries to evolve, disruption is transformative.

So, who has the power to disrupt? Essentially the answer is anyone, but Euromonitor has divided that into three categories

• Insurgents: Small but dynamic, fast-growing brands who tend to steal market share from bigger players.
• Incumbents: Well-known large multinationals who already hold significant market share and resources, often using incubation as a strategy when aiming to disrupt.
• Local brands: Brands that disrupt on a local scale in their home market, due to their close connection to consumers.

Market in Western Europe

The top five beauty and personal care players in Western Europe make up 38% of the total market value. Most of the top players have experienced flat or declining value share in recent years, under the emergence of smaller insurgent brands approaching consumers directly with “authentic” messaging and unique product propositions. Multinationals are being challenged by newcomers responding to demand for natural and efficacious beauty products, success stories including Germany-based Dr Barbara Sturm and UK’s The Inkey List.  Colour cosmetics also faces pressure from smaller disruptors. In Euromonitor’s Beauty Survey, the percentage of respondents in Europe who would prefer an “on-trend, new-to-me brand” colour cosmetics brand over a previously used brand, has increased year on year since 2015. Drugstores have performed well in the last years, fuelled by retailers enhancing their beauty offerings. Boots in the UK revamped its beauty sections, while German drugstore dm launched its private label brand 183 days, bringing new innovations to market every 183 days to target young experimental consumers. Internet retailing is the fastest growing channel in the region, driven by beauty retailers such as Feelunique and Cocopanda, and online giants Amazon and Zalando, all of which are expanding their beauty offers.

Market in Eastern Europe

The top five beauty and personal care players in Eastern Europe make

up 35% of the total market. Despite a growing interest for niche and local brands, disruption has been slower to take off, particularly as markets such as Russia and the Ukraine remain characterised by price-sensitive consumers due to fluctuations in disposable income. Skin care has experienced the biggest surge in innovative brands, boosted by demand for high-quality natural brands. Compared to Western Europe, the natural trend is at an earlier stage of development, meaning opportunity remains for niche natural brands to enter the scene. In Hungary for example, Deciem’s The Ordinary saw a powerful debut in 2018, known for its simple formulae and ingredient transparency. Niche unisex fragrances are also performing well, particularly among affluent Eastern European consumers searching for more authenticity and individuality. Internet retailing is also gaining momentum in Eastern Europe, again boosting the rise of niche brands. This is particularly key in larger markets, where the in-store availability of smaller brands in remote areas is limited. Czech based online retailer Notino has been expanding its presence, launching into Russia in 2019, while Sephora also launched into Russia last year, increasing the availability of niche brands.

Markets in Middle East and Africa

Among all regions, the Middle East and Africa is the most fragmented. Disruption in the region is diverse, predominantly due to differences in ethnicities, beauty standards and income levels. Domestic players tend to have a large presence, with the top five beauty and personal care players contributing just 30% of total value sales in the region. Hair care is the largest and most dynamic category here. African consumers are turning towards smaller niche brands that can offer personalised products, due to the feeling that multinationals fail to offer products suited to one’s individual hair type. Similarly, tailor-made skin care

and colour cosmetics brands are gaining popularity, especially those catering to African complexions, such as Pauline cosmetics in Kenya. Fragrances have traditionally been engrained in the culture of many Middle Eastern countries. Niche luxury scents are continuing to grow in the region, with well-known brands like Huda Beauty.

Supermarkets dominate the region’s beauty landscape, while internet retailing does not even fall into the top six channels. The presence of online retailing is much stronger in the Middle East. We can expect changes as technology advances and social media’s influence rises. Already in South Africa we are seeing changes, such as Superbalist, who recently launched a beauty shop on their website. These local brands draw success from their ability to trade on local knowledge, understand the needs of their local consumers, and create something unique to their home market. Looking back at the framework, renovation and innovation help companies and industries to evolve, through novel formats, ingredients, new ways of engaging with consumers and so on.While disruption is meant to be transformative, it’s about creating real value for the consumer, and meeting needs they might not have been aware they had. Disruptors see beyond the rules of the market and put consumers at the centre of everything they do.